Posted on Monday, Jan 18th 2016
According to recent research reports, the global open source software market was estimated to be worth $2 billion in 2013. Containers are the big rage in the market with tech giants like Microsoft, Amazon, EMC, and Cisco supporting them. Docker is the biggest startup in containers that has made it to the Billion Dollar Club and is set to go public.
San Francisco-based Docker was founded in 2010 by Forbes 30 Under 30 and YCombinator alumni Solomon Hykes. Docker initially began as as a Platform-as-a-service (PaaS) cloud offering that allowed for building and running applications. By 2013, the company had pivoted to using the technology of containers and becoming an open platform instead.
Today, Docker helps developers and system administrators create distributed applications. Their platform is based on the concept of Docker Containers that use resource isolation technologies to isolate the application’s view of the operating system. Docker Containers package application code in such a way that developers can then deploy on any server environment without changing the code.
The container model accelerates the software development lifecycle and improves infrastructure cost and efficiency. Docker claims that there is a 7x improvement in the time taken to ship software. That is an edge in the fast-paced market where businesses need to respond quickly to shifts in the technology and market.
Their solutions are used by web-scale companies like Baidu, eBay, Gilt, Groupon, Spotify, New York Times, Uber, and Yandex. There are over 75,000 Dockerized apps in Docker Hub, over 50,000 third party projects using Docker, and over 400 million Docker Container downloads.
Docker’s core technology is available for free. It generates revenue by charging its customers a subscription for support on its technology. Customers can choose from multiple subscription service offerings depending on the features needed. The basic free service allows access to unlimited public repositories and one private repository. Prices go as high as $50 per month for hosting services that grant organizations access to 50 private repositories. In June 2015, the company announced the availability of commercial subscription plans starting at $150 per month, which can be purchased directly from Docker or via its partners Microsoft, Amazon, and IBM.
Docker does not disclose its financials. They have been venture funded so far with $150 million in funding from investors including Goldman Sachs, Coatue, Northern Trust, Lightspeed Venture Partners, AME Cloud Ventures, Trinity Ventures, Sequoia Capital, Greylock Partners, Benchmark, Sequoia Capital, Jerry Yang, and Insight Venture Partners. Their last round of funding was held in April 2015 when they raised $95 million in a round led by Insight Venture Partners, which valued them at $1 billion. An earlier round held in September 2014 had valued them at $400 million.
Although they are partners, Microsoft is believed to be working on its own container service. Google, which worked with Docker on the container standard, offers Kubernetes, which competes with some of Docker’s offerings. The market is only set to get hotter and Docker is an attractive acquisition prospect.
Is Docker going to do well in the public market? Well, we don’t have detailed financials yet, but based on their commercial open source freemium business model, the question boils down to conversion rates from free to premium. Freemium businesses have been very tricky to scale, and we have to wait for Docker to disclose its conversion rates to assess whether they can sustain the Unicorn valuation.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
This segment is a part in the series : Billion Dollar Unicorns
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Is Stitch Fix the Next Blue Apron? . Atlassian is Doing Everything Right, But is it Too Expensive? . How Does Domo's Valuation Compare with Tableau's? . Is the Duopoly Keeping AppNexus from Listing? . Why Doesn't Adyen Want to Go Public? . Will Zuora be able to Compete with Oracle? . Will DocuSign Cave in to Potential Buyers? . Should Xiaomi List at a $50B+ IPO Valuation? . What is Marketo's Roll-up Strategy? . Will Apptio Expand Internationally? . What is Anaplan's Product Strategy? . Will Apttus Take the Plunge? . How Will Nutanix Control Dell? . Does New Relic Plan to Consolidate the APM Market? . What is Coupa's Next Acquisition? . Will Medallia Help Consolidate? . How Will Ellie Mae Handle Looming Mortgage Worries? . Will Zoom Go Public or Get Acquired? . Is GoodData Ready to Go Public? . Will a Sales Strategy Change Help Cloudera? . Can Splunk Sustain its Price Point? . Can Fortinet Get to $10 Billion in Revenue? . What Other MarTech Startups Will HubSpot Acquire Next? . 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